After days of nosediving, the benchmark KSE100 index of Pakistan Stock Exchange (PSX) gained more than 1,100 points during trading on Wednesday.
The index crossed the 44,000-mark and rose to 44,433 points at 3 pm – a gain of 1,199 points since trading began at 9am.
The market closed at 44,366 with an increase of 1,120 points.
Experts have said that the bullish trend is due to investor confidence after the monetary police announcement.
Economic analyst Sharoon Ahmed said that the investors and shareholders were expecting a 150 basis points to 200 basis points increase in the interest rate, but the State Bank of Pakistan (SBP) raised it by 100 points.
The central bank announced the monetary policy Tuesday pushing up the interest rate by one percent or 100 basis points from 8.75% to 9.75%.
On Monday, the market lost 519 points in anticipation of the monetary police announcement. Investors rushed to take their money out of the market as they were foreseeing another steep interest rate hike.
They were shocked with the monetary police announcement on November 19 when a 150-basis point hike in the interest rate took them by surprise and tanked the stock market.
The PSX hemorrhaged Rs332 billion on December 2 when it was revealed that the government has auctioned Treasury Bills (T-bills) at an interest rate of about 11%. It made investors to speculate that the State Bank of Pakistan will announce a major increase in the monetary policy rate.
The 100bps increase has been hailed as a good decision by the business community.